Higher education cost soars higher

College costs rise, state support falls, squeezing students in financial vise

University of Memphis students gather in the crowded Alumni Mall in the School's Student Center Wednesday afternoon to study, play cards, or just hang out. Students at Tennessee schools like U of M are getting caught in the grider as tuition costs raise and state appropriations for higher education continue to decline.

University of Memphis students gather in the Alumni Mall in the School's Student Center on a weekday afternoon. Students at Tennessee public universities are caught in the middle as tuition costs rise and state appropriations for higher education fall.

Jim Weber/The Commercial Appeal

Illustration by Shane McDermott/The Commercial Appeal

NASHVILLE -- Parents who began saving in 1993 for their newborn's college education might wish they had Warren Buffett as their investment adviser: That son or daughter who entered one of Tennessee's public universities this fall is paying tuition and mandatory fees that are 340 percent higher than in the year they were born.

By comparison, the Dow Jones Industrial Average is up about 220 percent and the U.S. Consumer Price Index has risen 57 percent since 1993.

And more tuition increases are on the way. Last month the Tennessee Higher Education Commission proposed a budget plan for the 2012-13 school year that projects tuition hikes of 5 percent to 8 percent next fall at the University of Memphis and the University of Tennessee, Knoxville; 3 percent to 6 percent at all other universities and community colleges, and 5 percent to 10 percent at state technology centers. The amounts within those ranges are pegged to whether the state legislature increases state funding for higher education or cuts it again, and by how much in either case.

Declining state appropriations are the biggest factor behind the large increases in tuition and fees on Tennessee's public college campuses in recent years. Students and their families are shouldering a much larger share of the costs of running the state institutions, while the share funded by taxpayers has plunged.

Through the mid-1980s, the state paid about 70 percent of what its public colleges and universities cost. But that share has been trending downward ever since, through both Democratic and Republican control of the state Capitol.

By 2000, the state share had declined to 57 percent of the costs of running its universities and 68 percent of the cost of its community colleges.

In the current school year, the state share is down to 34 percent for the universities and 40 percent for the community colleges, according to the Tennessee Higher Education Commission.

The tipping point when students began paying more of the costs than taxpayers occurred in 2004 at the universities and just last year at the two-year campuses, THEC says.

At the U of M this school year, students taking 15 credit hours per semester are paying $7,696 in tuition and mandatory fees (fees paid by every full-time student), compared with $1,748 in 1992-93 when this year's freshmen were born.

At UT Knoxville, students taking at least 13 credit hours are paying $8,396, up from $1,898 18 years ago. (UT students pay a flat rate for a full course load of more than 12 hours. U of M charges on a per-hour basis across the board.)

Those numbers don't include costs of residence halls, meal plans, books and supplies.

U of M estimates the total cost of attendance this year for in-state undergraduates living on campus at $21,816, including transportation and personal expenses. At UT Knoxville, the estimate is $23,571.

The current year's tuition and fee bill alone at U of M is $706 higher for a student taking 15 hours than it was last year, after a 10.1 percent increase in July. The proposed 8 percent increase in tuition alone would add $516 next year.

"Speaking as a student at the University of Memphis, we're going to feel that because most students work while they go to school," Quintilianus Carger, a junior majoring in business management, said. "It's money you have to come up with."

Carger, 20, works about 30 hours a week in the university center. "I see it more and more. They've raised the price of food and now are going to raise tuition again, after raising tuition last year and the year before. It raises the question among students: When is it ever going to stop?"

No time soon, state officials say.

Gov. Bill Haslam has held out hope that future tuition increases won't be as large and that the state can begin increasing its share when state revenue starts rising.

"Higher education has been taking cuts for several years. They also have a huge (construction) need. I think there will have to be some tuition increase. My hope is that we can fund them at a good enough rate where it's not anything close to what it was last year."

Tennessee has 261,000 students in its public universities, community colleges and technology centers.

There are multiple reasons for the slower growth -- and in recent years, actual declines --- in state aid to the campuses.

But the primary one is "extraordinary growth in costs of the TennCare program compared to the more normal growth in state tax revenues," said John Morgan, chancellor of the Tennessee Board of Regents system. Morgan has a dual perspective on the issue; he was the state comptroller and previously deputy comptroller for several years prior to his current role at the Regents system.

"TennCare was crowding out other needs, and since higher education had an additional funding source -- tuition -- budget makers made the choice to not increase higher-ed funding."

But another major factor, he said, is the structure of the state tax system itself.

"Our state tax system -- unless we raise tax rates -- only produces revenue growth about 85 percent as fast as the economy grows. Therefore unless we raise tax rates or levy a new tax, something has to give."

The state's last general tax increase was in 2002, when lawmakers raised the sales tax from 6 percent to 7 percent. That was 10 state fiscal years ago.

Prior to that, state sales taxes had increased about every eight years. But with state and local sales taxes combined at nearly 10 percent, virtually no policymaker believes Tennessee sales taxes can be raised any higher.

Revenue aside, Tennessee is failing to keep pace in its support for higher education even by its own standard -- the complex and long-running "formula" for calculating how much public higher education costs and the amount the state should spend on it

The last year the state fully funded its share of the formula was 1987, THEC says. In 2000, it was funded at 89 percent and in 2008 at 86 percent.

But then the Great Recession struck and state revenues declined. In the current school year, the state is funding only 58 percent of what the formula says it should: $732 million in public funding, out of the $1.25 billion the formula says is needed.

Even as large as the tuition increases have been, they have not made up for all of the cuts in taxpayer funding, nor covered the amount the institutions need. So the campuses have had to cut spending.

Administrators say that it's misleading to compare the costs of running universities to indexes that measure broad economic activity like housing, food and gasoline.

"Higher education is a labor-intensive enterprise, and a large share of the workers are very highly educated relative to the average worker," said Morgan. "For higher education to compete effectively within that pool of workers, salaries had to try to keep up."

There's also little market pressure to hold down the sticker price of higher education. Because of federal financial aid, student loan programs and later the Hope Scholarship program, higher education was able to raise tuition without a large effect on enrollment trends, Morgan said.

"But we are likely going to see that change. Some of our institutions believe that last year's tuition increase resulted in some lower enrollment numbers," he said.

For many students, the lottery-funded scholarships have blunted the impact of the steep tuition increases. But even those students who qualify for the base $4,000-a-year Hope Scholarships are now paying more out of pocket than their older siblings did before the scholarship program began in 2004.

There's more bad news: A legislative task force has proposed tightening eligibility for the scholarships and cutting the amount of the grants, to deal with a potential deficit in the program 10 years from now. The full General Assembly will act on the proposal after it convenes in January.

About $300 million in lottery-funded aid is flowing to about 100,000 students at public and private schools in the state.

Low investment returns and higher tuition also prompted officials this year to shut down new enrollments and new purchases in a prepaid tuition program created by the legislature in 1997, the Baccalaureate Education System Trust, or BEST program..

Tennessee's separate need-based scholarship program -- not funded by the lottery -- is helping 31,400 of the state's neediest students this year. But many more students who are eligible are not served because the $56 million in state funding runs out early every year.

Here's a look at how annual tuition and mandatory fees at the University of Memphis, the University of Tennessee, Knoxville and Southwest Tennessee Community College have risen over the past 25 years. These figures from the Tennessee Higher Education Commission do not include the cost of residence halls, meals, books, supplies or other expenses.